The Australian dollar has fallen below 90 US cents, its lowest level in almost three years, after further signs of a recovering US economy.

The dollar slipped past 90 US cents about 10pm yesterday, after a better-than-expected ADP national employment report and a surprise rise in US growth for the second quarter pushed the US currency higher.

The Australian dollar's year-to-date.

The Australian dollar briefly rose above 90 US cents early this morning before falling again, after greenback pared some of its gains when a statement from the Federal Reserve gave no new indication of when it would wind back its stimulus programs.

Advertisement

"The FOMC meeting didn't provide a clear indication about when they would begin to taper asset purchases, and that did weaken the US dollar a little bit later on, but it wasn't enough to support the Aussie," said Commonwealth Bank currency strategist Peter Dragicevich.

"The Aussie did continue to under-perform [this morning] and it has done for a number of weeks, and it really took another leap down on the comments from RBA governor Stevens earlier this week."

All bets on rate cut

The Australian dollar weakened earlier this week after comments from Reserve Bank governor Glenn Stevens kept the door open for interest rate cuts in a dovish speech on Tuesday.

The currency shed a cent, while financial market expectations of an interest rate cut at the RBA's board meeting next week rose up to 92 per cent, Credit Suisse data showed.

The dollar has shed more than 15 per cent of its value since mid-April.

Mr Stevens said last week's mixed second-quarter inflation data had not changed the central bank's view that inflation was not a barrier to further rate cuts.

He said the weakening dollar was not expected to lift inflation significantly, and that he would not be surprised if the currency fell further. Both comments were read by economists and financial markets as signalling further monetary policy easing.

"That's really opened the door to a lot of people expecting the RBA to provide more stimulus than just the one more rate cut," Mr Dragicevich said.

Recovering US economy

The Australian dollar's downward slide is expected to continue as the US economy stages a recovery in fits and starts, economists said, with forecasts as low as 80 US cents by 2014.

The US's second-quarter GDP growth rose 1.7 per cent, according to figures published overnight, above economists' expectations of 1 per cent.

ADP's jobs report for private sector employees saw 200,000 jobs added last month, and was a positive sign ahead of the US government's non-farm payrolls data, which will be released tomorrow.